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Hell's to Pay



NO private gambling ventures could touch those that took place in Wall Street. Titans of the 1860s, men with private lives of perfect probity, who would never have dreamed of using marked cards in a poker game, pulled off highly questionable stock deals. The very word "deal" was a euphemism for sheer swindle. Typically, an Arizona mine was capitalized at five hundred thousand dollars, in five hundred thousand shares of one dollar each. It was probably worth just that amount. Nevertheless, by flaming advertisements, by lying opinions of the experts, by the process known as 'washing'-that is by hiring one set of brokers to buy and another to sell-the price of shares was forced to fifteen times their value. Then, when the public was safely trapped, the operators allowed the stock to tumble into the cents. Thousands were ruined. They were nearly all people of small means."

The more daring Wall Street gamblers often combined to play their own brand of freeze-out poker in stocks. Banks were required to keep only 25 per cent of their deposits and circulating cash on hand. The latter was listed in daily clearinghouse reports so that operators knew at all times how much money was available in the city. To create a "tight money" situation, a combine of big speculators might tie up the available funds by borrowing heavily, each man tackling a different bank. The combination would thus "lock up " the cash of the majority, if not of all the banks, making money difficult to borrow and causing the shorts, compelled to pay high to cover their deliveries, financial distress. With money tight, the gamblers could make staggering profits by raiding Wall Street.

The greatest raider of them all was Jay Gould and the greatest raid he ever staged was when he tried to corner the nation's free gold. Gould, whose family name was originally Gold and who was appropriately christened Jason, had the qualities that make a perfect gambler. He was endowed with a ruthless, agile, and imaginative mind and he had money and experience to back his play.

The United States Government held well over $75,000,000 in gold in 1869. Somewhere in the neighborhood of $25,000,000 was in circulation. This was traded, like a commodity, in New York's Gold Room at Broad Street and Exchange Place. Gould believed that the circulating gold supply could be cornered and that anybody who held it could manipulate the value. A fortune lay in the grasp of the man who could sell it for greenbacks at his own price to speculators who were caught short.

On September 1, 1868, the Gold Room listed gold at 145, which meant that $145 in currency bought $100 worth of gold. The government had issued greenbacks so recklessly during the Civil War that the country was only now recuperating from a severe case of inflation. In March 1869 the price of gold touched its lowest point in three years - 132 to 140. It stayed low till the middle of April, when Gould set the stage for his foray by buying $7,000,000 worth, causing the price to hike from 132 to 140. Other veteran traders smelled a bull market and followed Gould; they ordered their brokers to buy. Gold was up to 144 7/8 by May 20. Gould sat on his holdings and there was a lull in trading. The market declined to 136 on July 31.

The largest holder of gold in the United States, the government, presented the only major threat to Gould's scheme. It behooved him to make certain, through the Secretary of the Treasury, that the government would not take alarm and throw its vast reserve into the breach if the price rose, which would reverse the trend and pull the price down. To prevent the government from selling, Gould planned to influence President Ulysses S. Grant, through people close to him.

Abel Rathbone Corbin, Grant's brother-in-law and a persuasive talker, was to be Gould's string puller. For propriety Gould dressed his plan in the argument that an advance in the price of gold would benefit the country and bring farmers fat prices for their bumper crops. Just possibly Gould's willingness to buy Corbin $1,500,000 worth of gold was the most convincing argument of all.

The President was to stay at the Corbins' house in New York on his way to a Peace Jubilee in Boston, so it was easy to arrange for Gould to have a talk with him. At their meeting Gould cast himself in the role of a public-spirited citizen, eager to promote prosperity among farmers and merchants. Grant, disappointingly, was reluctant to discuss the matter.

Gould and other men who were involved in the gold conspiracy took pains to entertain the President and dog his steps. Grant accepted an invitation to Jim Fisk's Grand Opera House on Twenty-third Street, where he sat in Fisk's private box with Cyrus W. Field, Jay Gould, and several of Gould's cohorts. Strangely enough, Fisk, who was Gould's partner, was not yet in his confidence about the plot, but he had a shrewd notion that something big was brewing. The next day Grant was persuaded to make the trip to Boston on the Providence, most luxurious vessel on the Narragansett Line, which was owned by Fisk and Gould.

Many notable New Yorkers and Bostonians sat down at Grant's table at supper that night aboard, among them the archconspirators in the gold plot. As Gould remembered it, "At this supper the question came up about the state of the country, the crops, prospects ahead &c. The President was a listener; the other gentlemen were discussing; some were in favor of [Secretary of the Treasury] Boutwell's selling gold, and some opposed to it. After they had all interchanged views, some one asked the President what his view was. He remarked that he thought there was a certain amount of fictitiousness about the prosperity of the country, and that the bubble might as well be tapped in one way as another. We supposed, from the conversation, that the President was a contractionist.. . . His remark struck us like a wet blanket."

So dampened were his colleagues that the next morning Gould found one of them telegraphing his broker to sell his gold. The President's words leaked out to Wall Street and the price of gold toppled.

Mr. H. H. Van Dyck, assistant treasurer at New York, resigned his position in June, and Gould read this as a favorable turn of events, for it was he who had sold the government's gold. Gould impressed on Corbin the necessity of having in that job someone in league with what Wall Street now called the "Goldbugs." Corbin pulled strings dutifully and General Daniel Butterfield was appointed and took up his duties on July 1.

Gould made a large private loan to the general and offered him a chance to buy stock in the Tenth National Bank, in which Gould owned the controlling interest. Gould later testified that he twice bought gold for Butterfield without repayment, in August and again in September, to a total worth of $1,500,000. He also proposed to buy $500,000 in gold for General Horace Porter, the President's private secretary, but Porter refused to accept it.

Though Gould and his Goldbugs bought steadily through July and August speculators, believing that the government was bearish on gold, failed to follow the lead and prices did not rise. Gould went into a high-gear propaganda campaign. The theme was the same-greater general prosperity and improved overseas markets-and was promulgated by an expert on finance who issued impressive reports run as unbiased articles in newspapers and magazines.

Plenty of people were persuaded, but Gould knew that his plan would never work unless the government went along with it and withheld its gold surplus. The President was his main target, as one New York historian noted. "Hundreds of persons of different walks of life were posted where they could come into contact with Grant and be able to give him their views on the question of the Government policy in relation to gold, views which were the carefully rehearsed opinions of Gould. At almost every public dinner or political meeting Grant attended, the subject was brought up and Gould's viewpoint impressed upon Grant. Everywhere Grant went he heard Gould's opinion echoed. This man of action was exceedingly naive in most things. He was very much impressed by this well-organized propaganda and in the honesty of his simplicity he began to believe that Gould was right."

The Goldbugs also worked on Boutwell and were on the alert for any clue as to the government's policy on selling gold. According to the newspapers he declared that he "would not heed the gold gamblers" and that what was done in Wall Street was "none of his business."

Consciously or not, Boutwell played into the Goldbugs' hands. Wall Street speculators believed that they would not be up against government interference. The price of gold rose slightly.

The President added encouragement. After visiting Corbin in New York again he wrote Boutwell, requesting him not to sell gold in any but limited quantities. Boutwell telegraphed instructions from his home in Massachusetts to the Assistant Secretary of the Treasury at Washington to sell no gold during September. Jay Gould's machinations were bearing fruit. Gould immediately began buying gold, as did his fellow conspirators. On September 6 the price was up to 137 5/8. By adroit purchasing the price was manipulated to rise steadily, not by leaps and bounds. Gold that Gould bought for Corbin on September 2 advanced $25,000 in value in less than a week.

The shorts, alarmed lest a tidal bull market wipe them out, began pooling their resources under the leadership of James Brown, banker, and Henry Clews, veteran Wall Street plunger. Gold constantly came up for sale, even alarming some of the Goldbugs who found themselves buying more than they had intended to. W. S. Woodward, supposedly one of Gould's staunchest allies, prevailed on Gould to take all but $4,000,000 of the $18,000,000 in gold he had purchased.

European orders for American goods increased and brightened prospects of higher prices for exported goods. With Europeans ready to pay American manufacturers and American tariffs in gold, there was reason to expect that both Treasury reserves and the supply of free gold would build up. The normal tendency in such a case would have been for the price of gold to decline. To keep it high, Gould had to go on buying. He was to testify that he "did not want to buy so much gold.... I had to buy or else back down and show the white feather . . . all these fellows deserted me like rats from a ship."

Gould did not like risking all his money on one game, and this was a costly game. He made deposits in the Tenth National, of which Boss Tweed was a director, and arranged to be supplied with unlimited certified checks to use as cash, no matter how limited his deposits in the bank. The middle of September he drew on another source for finances - he let Jim Fisk in on the scheme. That noisy scoundrel, notorious for his affairs with show girls, his relish for a rough fight and wild gambling, could lay his hands on millions, particularly from the treasury of his Erie Railroad. When Gould intimated that the President, Mrs. Grant, Generals Porter and Butterfield and Secretary of the Treasury Boutwell were all implicated, Fisk was delighted by the aura of corruption and the chance to put something over in a big gamble.

On September 10, 1869, Grant once more visited Corbin, staying three days and again seeing Gould, who harped on the soundness of high-priced gold. The taciturn Grant gave no indication of being a hundred per cent behind this theory and left on the thirteenth with General Porter for a brief vacation in Washington, Pennsylvania. Gould meant to corner gold by the end of the month and needed assurance that the Treasury would be forbidden to sell. He had Corbin write a letter to this effect to the President - a serious blunder. Porter opened the letter and, remembering the bribe Gould had offered him, voiced his suspicions to Grant.

The papers had reported that Corbin was plunging in gold, and this, with the letter and Porter's suspicions, awoke Grant to the fact that Gould and Corbin wanted to use the administration to feather their nests. The President had Mrs. Grant write Mrs. Corbin that he was sorely upset by newspaper rumors of Mr. Corbin's speculations in gold. If these were true, Mrs. Grant said, the President strongly requested that Corbin call an immediate halt on his Wall Street ventures.

In the meantime Gould had boldly written to Boutwell, advising that the government not sell its gold, indeed that it should purchase more and help put it at a premium. This succeeded in steering Boutwell squarely into the opposing camp.

Between $30,000,000 and $40,000,000 in gold had been bought up by the middle of September, more than was in the actual floating market, and rumors were spread (obviously by the conspirators) that everybody, from President Grant down to the doorkeepers in Congress, was in cahoots with the men who were driving the price up. Hordes of lesser Wall Street gamblers jumped on the band wagon. By the twenty-second gold stood at 140 1/2, with Gould holding at least $50,000,000 through various brokers.

Major banking houses, which had profited by helping the government finance the Civil War by buying and selling bonds, had greatly increased their profits in inflated currency when the price of gold was high. In particular jay Cooke 8c Co., "the financier of the Civil War," saw the machinations of Gould and the Goldbugs and began pressing the government to sell gold and deflate the national currency to "hard money" - a paper dollar that could buy an equivalent value in gold. Newspapers supported this attitude. Horace Greeley, in the third week of that eventful September, vociferously demanded that the government sell gold till the price was forced down to normal levels.

Much money was diverted from business and industry all over the country as thousands of honest men were whipped into speculative frenzy by the bull movement. News from the Gold Room seriously threatened to paralyze trade. Hundreds of firms began to suffer as the confidence of foreign merchants in the stability of U.S. currency was shaken.

On Wednesday, September 22, Corbin read Mrs. Grant's letter to his wife and that night, in his library, went over it with Gould. Corbin, terrified, declared that he would write the President that he had no interest in the bull market in gold. To make the big lie true, he intended to back out of the whole business, but not with empty hands. He proposed that Gould pay him $100,000, which, plus the $25,000 he had already received, represented part of the profits accrued from the million and a half Gould had bought him. Gould told Corbin that he would give him his answer in the morning and to keep the letter secret.

According to testimony, the next morning Gould offered Corbin $100,000 if he would stay in the conspiracy, nothing if he backed out. Corbin, suddenly virtuous, decided to step out but promised to divulge the contents of the letter to no one else. This was Corbin's story. Gould maintained that Corbin pressed for the $100,000 and that the meeting broke up with Corbin sworn to secrecy but Gould noncommittal on the $100,000.

Stock prices were falling and Gould, as well as other seasoned traders, saw that the end was near. Caught in the maelstrom, Gould feared that the government might break the corner he held on gold, leaving him committed to buy on in a falling market. He even considered forcing the shorts to cover at his terms since he knew that they could not deliver half the gold they had contracted to sell him. He decided that his only out was to find an immediate market for his holdings without bringing the price down.

To Fisk, the partner he was about to victimize, he confided that the time was ripe for the last quick round of the game. Fisk was to buy and continue buying till the price reached 160, giving all his orders orally, not in writing-and not to worry. Loudly proclaiming that gold had just started to rise, Fisk gave a crowd of brokers unlimited orders to buy. Albert Speyers and William Belden set an example by buying two and three millions at a time for him. Gold started to rise on Thursday, September 23, with a host of speculators stimulating. the market. At the same time Gould began his Gargantuan double-cross, quietly unloading gold through fifty different brokers. He was careful to make token purchases so that not even Fisk would suspect that he was no longer a bull. At the same time lie sold his gold holdings, a total reported at between $50,000,000 and $100,000,000 held on margin, on the twenty-third at the high prices induced by the buying of Speyers, Belden, and the rest. "My purchases were very light. I purchased merely enough to make believe I was a bull," he said.

Riding to Wall Street in a carriage on the day that has since been remembered as Black Friday, Gould and Fisk read with interest an article in the Times accusing the administration of being closely allied to the gold clique. Fisk remarked that he hoped the President would not disprove the accusations by ordering the Treasury to sell gold.

Gould and Fisk made their headquarters that day the offices of William Heath 8c Co., which had made most of the ring's purchases. Strono--arm bullies were posted at the doors and a swarm of runners stood ready to convey the conspirators' orders. All the high command were present by 8:30 in the morning, and mapped out the strategy for the last desperate maneuver. Purchases were to be made in William Belden's name. Fisk would give orders to buy, conveying the impression that they were for his and Gould's account, lest brokers hesitate to carry out the orders. Albert Speyers, a suitable stooge, would stay in the Gold Room and bid up the price. Other leading brokers in the ~old group would summon the shorts and frighten and bully them into making private settlements at ruinous rates. Jay Gould, the Judas in their midst, participated in the plotting with assenting nods. "I had my own plans, and did not mean that anybody should say that I had opened my mouth that day, and I did not."

At nine o'clock when Speyers went into the Gold Room the market price of gold was 14314. His first orders were to get all he could for 145 or less. When gold reached 145 Speyers was to put it up to 150 and, when it reached 150, to 160. Speyers later testified, "I then went back and bought gold till I got it up to 160. After I had bought a lot at 160, I reported again to Mr. Fisk, and he told me I should continue to buy at 160. Gold passed 160 and went to 163 1/2."

At the same time the conspirators told off to deal with the shorts took a long list of them-including more than 250 firms, many of them bankers and prominent merchants-and these borrowers were summoned, one by one, and browbeaten into settling up. As each one came to terms a report was sent to Gould and Fisk, but still Fisk ordered Speyers to buy and keep the price up to at least 160.

A crowd had gathered in front of the Gold Exchange and was betting on its clocklike indicator, which could be seen from the street. Spectators wagered sums from ten to fifty dollars on how many minutes it would take the price to change from a half to a point. If one sidewalk sport waved money in the air and said that he had fifty dollars to bet that gold would rise half a point in three minutes, another gambler would cry, "Taken!" and pull out his watch.

Brokerage houses and banks across the country began to close their doors before the morning was out and by the end of the afternoon every financial center in the United States was filled with hysterical, white-faced ruined speculators. An enraged trader in Philadelphia's noisy exchange was jeered when he threw a pirate's flag on top of the indicator that was climbing madly with the prices in New York's Gold Room.

All that Friday morning the climb continued and the White House was besieged with anxious telegrams. At eleven o'clock Grant ordered the Secretary to start selling gold, and Boutwell wired General Butterfield in New York to "sell four millions ($4,000,000) gold tomorrow." Boutwell made no secret of the message, sending it Western Union at 11:42, received in New York at 12:10, and by Franklin telegraph line at 11:45, received at 12:05. A Congressional investigating committee decided that Western Union's extra eight minutes were due to an operator's delay, not to time taken to forewarn any of the people involved.

But events on the Gold Room floor hint that speculators knew of the message before Butterfield did. At about 11:50 gold stood at 162. Suddenly it dropped several points, despite Speyers's offers to buy at 160.

The bears, still panic-stricken, were moved to cheers that day when James Brown stepped forward and offered to sell Speyers one million in gold at 162, another at 161 and, moments later, five millions at 160, probably on advance advice of the telegrams. Other speculators, encouraged by Brown or knowing of the Boutwell message, began to snap up Speyers's offer to buy. A few minutes later news hit the Gold Room that the Treasury was going to sell and it was the gold clique's turn for panic. In fifteen minutes gold tumbled... 155. . .150... 148.. .144... 138.

The Gold Room was in a wild uproar. "Hell's to pay!" someone screamed. Albert Speyers went momentarily insane and ran around the room waving his book and gibbering that he would buy gold at 160 while everyone else was selling in the 130s. By closing time gold hit 133.

All that morning on Broad Street in front of the Gold Exchange "outside" speculators had milled and waved their little black notebooks as they traded in gold. The Stock Exchange was deserted. The collapse of the gold corner at noon was the death knell for most of the outside operators. Ruined speculators wandered like lost and betrayed sheep. Their grief soon turned to fury and they marched in a lynching mood to the offices of Fisk and Gould. Fisk was not there. He had gone to Corbin's house, where, in insulting language, he accused the President's brotherin-law of deceiving the Goldbugs as to his influence over Grant.

The gold ring was smashed and countless thousands of speculators wiped out on Black Friday. The big bulls and the lesser speculators, traveling with the gold conspirators, now howled in agony as the market crashed.

Gould alone among the conspirators came out ahead. No one will ever know exactly by how much, but many believe he made $11,000,000. His cunning had saved him. At the last he turned it to one more audacious plan-to save Fisk and compensate Belden and Speyers for being his chief scapegoats. Fisk was to refuse to acknowledge or pay for any purchases made by Belden and Speyers, since there were no written orders. Belden and Speyers would assume financial responsibility and declare themselves bankrupt. On Monday morning Gould obtained twelve injunctions and judicial orders, through one of Boss Tweed's venal judges, restraining officials of the Gold Exchange from enforcing the rules that compelled settlements of contracts among its members. In this way Fisk was saved from answering the demands of scores of victims.

Speyers and Belden are supposed to have each received a life annuity from Gould for taking responsibility and Gould and Fisk rode out the lawsuits that choked the court calendars for months as speculators tried vainly to collect profits they had made on paper that Black Friday. They hadn't a chance. Boss Tweed was the law and Tweed did as Gould wished. Not even James Brown could collect $7,000,000 Speyers had thrown into the hopper minutes before the corner broke. Fisk did not renounce Gould when he learned what he had been up to; rather, he cherished him for the bravura of his betrayal.

Business was paralyzed for weeks and accusations flew linking officials of the government with Gould. An investigating committee absolved Grant. After getting too close for comfort to firms with which Congress dealt the hearings summed up that "gambling is the very life-blood of the nation, in the currency of the country, in which every person throughout the land is interested." Business morality, it was found, was shaken and the events leading up to Black Friday "produced an impression on the mercantile and financial mind, not only in this country but all over the world that we are here a set of gamblers. . . ."



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